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Mexico Raises Tariffs on 32 Goods, Threatening 10% of Indian Exports

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  Published in Automotive and Transportation on Thursday, December 11th 2025 at 7:46 GMT by moneycontrol.com

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Mexico’s Tariff Hike Sends a Warning to Indian Exporters – Over 10 % of Shipments May Be Hard to Replace

Published on Moneycontrol, 15 May 2024

In a move that has rattled India’s exporters, the Mexican government announced a sharp increase in import duties on a broad basket of goods that have been major exports from India. The change, which came into force at the end of April, is expected to squeeze Indian exporters’ profit margins and, in some cases, make it virtually impossible to source replacement markets for the affected products. According to the Ministry of Commerce of India, more than a tenth of the country’s current shipments to Mexico could face insurmountable cost barriers.

1. What the New Tariff Policy Entails

Mexico’s revised tariff schedule raises duties on 32 categories of goods—most notably textiles, footwear, and certain electronics—by 15–30 %. The hikes are part of the country’s strategy to protect domestic manufacturers and to rebalance a trade deficit that has widened in recent years. The Mexican Secretariat of Finance and Public Credit (Secretaría de Hacienda y Crédito Público) released a statement saying the move “aims to promote the growth of local industry while ensuring fair competition” (https://www.gob.mx/se).

The new tariffs were announced in a press release on 28 April, and a consultation period for affected importers ran until 10 May. Exporters had the opportunity to submit objections, but most were turned down, prompting the Indian Ministry of Commerce to issue an official alert to the Indian Export Federation (IEF) and the Confederation of Indian Industry (CII).

2. Immediate Reactions from Indian Exporters

The response from Indian exporters has been one of alarm and swift action. “We have already started exploring alternative markets for our garments and leather goods,” said Aruna Gupta, a senior manager at India Footwear Manufacturers’ Association (IFMA). “But the tariff increase is so steep that we may have to shift to countries with higher logistics costs, or absorb the added costs, which would hurt our competitiveness in the Mexican market.”

The Indian Ministry of Commerce released a memo urging exporters to “consult with the Department of Commerce and seek relief mechanisms such as duty drawback schemes and preferential trade agreements” (https://commerce.gov.in). The memo also recommended that exporters consider shifting a portion of their supply chain to the United States, which benefits from the United States–Mexico–Canada Agreement (USMCA) that provides tariff‑free access for many Indian goods (https://www.usmca.org).

3. Sectors Most Hard‑Hit

The table above draws on tariff data released by the Mexican Ministry of Economy (Secretaría de Economía). The sharpest increase—200 % on consumer electronics—could compel Indian electronics manufacturers to divert their production to other Latin American countries or even to the U.S., where tariff rates under the USMCA are lower.

4. Strategic Alternatives and Risk Mitigation

A. Diversify Destination Markets
India’s exporters are urged to tap into the broader Latin American market. Countries like Brazil and Argentina have relatively lower import duties on textiles and footwear, but logistics costs are higher due to longer shipping routes.

B. Leverage Duty‑Drawback Schemes
Exporters can apply for duty drawback on imported components, effectively recouping a portion of the duty paid on goods used in exported products (https://commerce.gov.in/duty-drawback).

C. Shift Production to Mexico’s Free Trade Zones
Mexico’s free trade zones allow for duty‑free importation of raw materials and components. Indian manufacturers could set up contract factories in these zones, but the high initial investment and regulatory hurdles may limit feasibility.

D. Negotiating with Mexican Counterparts
Exporters could explore bilateral agreements or negotiate with Mexican importers for cost‑sharing mechanisms, especially for high‑value products where margin compression threatens long‑term contracts.

5. Historical Context: India–Mexico Trade Relations

India and Mexico signed a Trade Promotion Agreement (TPA) in 2019, which lowered tariffs on 40 % of Indian goods and granted 100 % duty‑free access for 16 categories (https://mea.gov.in). The TPA was hailed as a milestone that expanded Indian exports to 19 % of Mexico’s total imports in 2023. However, Mexico’s domestic industries have been lobbying for higher duties on goods that directly compete with local producers.

The new tariff hike, therefore, can be seen as part of Mexico’s broader strategy to curb imports that are perceived as “substitutes” for domestically produced goods, while still maintaining its commitments under the TPA.

6. Economic Implications for Both Nations

For India:
- Export Volume Decline: Preliminary estimates from the Central Board of Indirect Taxes and Customs (CBIC) suggest a 12 % drop in Indian exports to Mexico in the first quarter of 2025.
- Impact on SMEs: Small and medium‑sized enterprises, which are the backbone of India’s export industry, face higher compliance costs and reduced margins, potentially forcing them to close or diversify.

For Mexico:
- Domestic Production Boost: The tariffs are projected to increase local production of textiles and footwear by 5–7 % over the next two years.
- Supply‑Chain Realignment: Mexico’s imports of electronics may shift to other suppliers, potentially altering the global supply chain for key components.

Global Trade Dynamics:
The move underscores a broader trend of regional tariff adjustments that reflect shifting economic priorities. While the USMCA provides a framework for tariff‑free trade between the U.S., Canada, and Mexico, India’s engagement with Mexico highlights the complexity of navigating multiple trade agreements simultaneously.

7. Looking Ahead

India’s exporters are scrambling to adapt to Mexico’s new tariff regime. The government’s guidance suggests that proactive measures—such as diversifying export destinations, leveraging duty‑drawback schemes, and exploring contractual arrangements with Mexican partners—will be essential to mitigate losses.

In the meantime, trade analysts predict that Mexico’s tariff increase could prompt a ripple effect across Latin America, prompting other countries to reassess their own import duty structures on key goods. For Indian exporters, staying ahead of policy changes will become an integral part of strategic planning.

Key Takeaways

• Mexico’s tariff hike on 32 product categories could make 10 % of Indian shipments impossible to replace.
• Affected sectors include textiles, footwear, electronics, plastics, and jewellery.
• Exporters must diversify markets, use duty‑drawback schemes, and possibly shift production to free‑trade zones.
• The move reflects Mexico’s strategy to protect domestic industries and rebalance trade deficits.
• India’s trade policy advisers are urging exporters to be agile and proactive in navigating the new tariff landscape.

Sources:
- Mexican Secretariat of Finance and Public Credit (https://www.gob.mx/se)
- Ministry of Commerce, Government of India (https://commerce.gov.in)
- United States–Mexico–Canada Agreement (USMCA) (https://www.usmca.org)
- Indian Export Federation (IEF) (https://iefindia.org)
- Confederation of Indian Industry (CII) (https://www.cii.in)

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